There was a time ten year ago where shopping for clothes only meant walking down to the nearest retail store and purchasing the dress that you fancied the most. Whether you came back happy or sad directly depended on the money you paid, the choice(s) you made and the budget you had.
But the rapid growth of the internet in India has lead to mushrooming of e-commerce sites that offer prices far lower than the established players. With the rapid expansion of infrastructure, even the logistics scenario in the country has improved. This has lead to far lesser shipping times and a better connect between the e-retailer and the consumer.
There is no hiding the fact that the markup in organised retail for clothing is simply too high. Haven’t you felt that you have paid a Rs? 1000/- for a thing that at best didn’t take more than Rs. 400/- to make. There are many reasons for this behaviour, and those are more apt for discussion in an MBA classroom. Today we shall discuss the simple economics of buying from an online retailer.
Let’s take the case of a Lehenga being sold by the manufacturer for Rs 1000/- and study the two case studies on the final pricing of the lehengas:-
Case A, Physical Store @ Mall
Cost Price: 1000/-
- Overheads (A/C, Rent, Establishment, etc.) 100/-
- Margin 40 % : 400/-*
- Drive to/from the Mall 150/
- Parking 50/
- Food 500/-
* Retail margins in clothing is usually more than 100%
Case B, Online Store
- Overheads (A/C, Rent, Establishment Charges, etc.) 50/-
- Margin 15 % : 150/-
- Drive to/from the Mall Nil
- Parking Nil
- Food Nil
Total Savings a whopping Rs. 700/-!
Well, the cynics could say that the discounts that the established online players give are never this high, true, and this is because as online players grow big, they too start attracting overheads (or shareholders breathing down their neck??). That is why you have to get down and dirty and find little gems like them or like us.
Smaller online stores can at times give your great discounts not because they like you, but because, they have to. They are the new kids on the block, and they need to sell to survive. They are usually open to giving you discounts higher than what is listed on the website. So go ahead and take a plunge there are many small time retailers with the surprisingly well-organised delivery chain who can give you a great deal.
You may also like to read the Great Retail Discount Hoax on the insane markups and the consumer management theatre being run by the big retailers in the market.